The U.S. Department of Justice (DOJ) recovered $3.8 billion under the federal False Claims Act (FCA) last year, and for 2014 has already reached settlements approaching $3 billion. Some of the largest recoveries in 2013 involved health care fraud, including claims against firms in the pharmaceutical and medical device industries. Procurement fraud involving government contracts resulted in the next largest category of settlements at the federal level. (DOJ, 2013a)
In 2014, we see more of the same. Here are four examples, with settlements ranging from $2.2 billion to $2.1 million:
The DOJ will recover $2.2 billion from Johnson & Johnson, in a series of related whistleblower lawsuits settled late last year. The lawsuits involved J&J subsidiaries accused of misbranding and promoting off-label use of two different drugs, and of providing kickbacks to nursing home pharmacies. (DOJ, 2013b)
Infirmary Health Systems, two affiliated clinics, and a physician’s group have agreed to pay $24.5 million to settle an FCA whistleblower lawsuit alleging false claims for illegal Medicare referrals. (DOJ, 2014)
Sanborn Map Company of Colorado Springs, Colorado, has agreed to pay $2.1 million to resolve allegations that it submitted false claims in connection with Army Corps of Engineers contracts, by using unapproved foreign and domestic subcontractors when it was supposed to complete all map work itself. Sanborn is also alleged to have charged unrelated work to the projects. (Van Huis, 2014)
States are increasingly pursuing FCA actions, encouraged by the Deficit Reduction Act (DRA) of 2005, says business law firm Dickstein Shapiro, LLC. Language in the DRA encouraged states to create or strengthen their own false claims statutes to be at least as robust as the federal FCA. The incentive – states that complied would be able to receive 10 percent of the federal government’s share of recovered Medicaid funds, in addition to their own state recoveries. FCA cases are not limited to Medicaid fraud; State Attorneys General “have increasingly pursued novel and creative FCA actions” in recent years. (Nash, et al., 2014) Businesses need to pay attention to both federal and state actions to ensure that they are not engaging in activities that might violate federal or state FCAs.
Nash et al. provide a good reminder of steps businesses can take to reduce their exposure to FCA actions:
(1) Create and update compliance programs to ensure current compliance with all applicable legal requirements and to flag potential problems early before they give rise to an FCA claim.
(2) Establish appropriate and continuous training programs that inform employees of key legal obligations, and encourage employees to bring problems to the attention of supervisors and compliance officers.
(3) Audit business activities periodically by conducting interviews, surveying employees, and providing employees with opportunities to provide feedback regarding potential wrongdoing, to ensure those activities conform to the compliance program.
(4) Investigate all allegations of impropriety, no matter how unlikely, and regardless of the whistleblower’s credibility or motivations.
(5) Consider the ramifications of strategies that impact taxes or royalties remitted to the government and whether such plans might become the basis for reverse FCA claims.
As Ethical Advocate has urged before in its blog post “Record Whistleblower Settlements,” finding out about problems early through solid ethics and compliance programs, open door policies, improvement programs, and anonymous hotlines can help address such problems before they involve multi-million dollar settlements.
Nash, Bernard, Merle DeLancey, Christopher Allen, and Andrew Smith. “State False Claims Act Enforcement Explodes in 2014.” STATE AG Monitor, Dickstein Shapiro LLP, May 28, 2014.
U.S. Department of Justice (DOJ). “Alabama Hospital System and Physician Group Agree to Pay $24.5 Million to Settle Lawsuit Alleging False Claims for Illegal Medicare Referrals.” News release, July 21, 2014.
U.S. Department of Justice (DOJ). “Justice Department Recovers $3.8 Billion from False Claims Act Cases in Fiscal Year 2013.” News release, December 20, 2013. (2013a)
U.S. Department of Justice (DOJ). “Johnson & Johnson to Pay More Than $2.2 Billion to Resolve Criminal and Civil Investigations.” News release, November 4, 2013. (2013b)
Van Huis, William. “Mapping Contractor Pays $2.1 Million to Settle False Claims Act Suit.” Government Contracts blog, February 11, 2014.